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Market trends report
As is known, blockchains need to achieve a consensus among the nodes that maintain it. Bitcoin was the first cryptocurrency to bring the term “consensus algorithm”; it uses the Proof of Work algorithm (PoW), the object of great discussion today due to its excessive energy expenditure. Its main objective remains the same: to achieve consensus in a blockchain network.
As we mentioned earlier, this is the first blockchain consensus algorithm and it was first used by Bitcoin, the market’s leading cryptocurrency today. In PoW mining, miners solve complex mathematical puzzles that require a lot of computing power.
The first to solve the puzzle creates a block and receives a reward for it. The way to solve it is basically a ‘riddle’, since there is no alternative method other than trial and error.
Its operation differs greatly from the previous algorithm. Instead of having the miners prove that each and every one of the transactions is legitimate, the Proof of Stake or Proof of Participation requires that a person bet, hold or block coins and validate their ownership. In short, this algorithm replaces the intensive mining of the PoW with a mechanism where the blocks are validated according to the ‘participation’ of those involved.
Proof of delegated participation (DPoS)
The Proof of Delegated Participation (DPoS) is a very fast and well-known consensus mechanism for its implementation in EOS.
The way it works is that users vote for “delegates” who are given the power to make a profit by running a full node. The weight of your vote depends on your participation or blocking of coins.
Among the top cryptocurrencies in this group, we have EOS, Tron, Cardano, Tezos, Lisk, Bitshare and so on.
Proof of Activity (PoA)
The concept was first introduced in 2012 as an alternative to Proof of Stake, PoS. Proof of Activity is essentially an alternative structure for Bitcoin and is a mixture of two of the most popular consensus mechanisms: Proof of Work and Proof of Stake.
This mechanism works by starting with Proof of Work where miners essentially solve a cryptographic puzzle and claim their reward if they succeed. The difference lies in the fact that the mined blocks are only headers and mining reward addresses, instead of containing transactions.
Among the most popular currencies that use it are Decred (DCR) and Espers (ESP).
Proof of Burn (PoB)
Proof of Burn parallels the concept that it is impossible for someone to delete data from a blockchain. So, the concept is to ‘burn’ coins. It consists of providing evidence that some coins have been burned in the process of sending a transaction to an address that cannot be used.
This method only works with coins extracted from cryptographic currencies of Proof of Work. Users will try to burn the most coins to “win” the block reward. Most of the time the burn test has been introduced to slow other coins destroying the value of one.
The selection process is said to be random, but at the same time, it is also said that the more coins the user burn, the greater their chances of being selected to extract the next block. This is somewhat similar to the Bitcoin process where the investment lies in the computing power that needs to be improved to obtain better hash rates.
Slimcoin (SLM) is the great example of this algorithm. Also, TGCoin or Third Generation Coin, use the algorithm.
Proof of Capacity (PoC)
The Proof of Capacity is a consensus mechanism that uses a process called tracing. With Proof of Work, miners use computing to guess the correct solution; however, with Proof of Capacity, the solutions are previously stored in digital stores (such as hard drives). This process is called tracing.
Whoever has the fastest solution for the puzzle of a (new) block, can create the new block. The more storage capacity you have, the more solutions you can store, the greater your chances of creating a block.
Burstcoin was the first to introduce this concept. Other examples are Chia and SpaceMint.
Proof of Elapsed time (PoET)
PoET is a consensus mechanism algorithm that is often used in authorized blockchain networks to decide mining rights or block winners in the network. Authorized blockchain networks are those that require any potential participant to be identified before they can join. Based on the principle of a fair lottery system where each node is equally likely to be a winner, the PoET mechanism is based on equitably distributing the chances of winning among the largest possible number of network participants.
Essentially, the workflow is similar to the consensus mechanism followed by the Bitcoin Proof of Work (PoW) algorithm, but without its high-power consumption. The most exemplary case of this protocol is Hyperledger Sawtooth, a modular, authorized and enterprise-level blockchain platform.
Obelisk consensus algorithm
Obelisk is a promising consensus algorithm that aims to eliminate the shortcomings of the Proof of Work (PoW) and Proof of Stake (PoS) algorithms, making it possible to maintain the blockchain status in the distributed network with minimal computing power and no need for participation. It reduces the need for mining, significantly improves the speed of transactions and offers improved security.
Proof of Assignment (PoA)
It is a consensus mechanism of the new era that requires less power and can run on relatively low-end hardware. The PoA work mechanism allows daily Internet of Things (IoT) applications to be used for basic mining capabilities of limited capacity. With their on-board processing power, IoT-compatible devices can be used for cryptocurrency mining.
The most notable example is in the IOTW blockchain.
Proof of Formulation (PoF)
The novel consensus algorithm proposed by FLETA is called Proof Formulation (PoF) tries to solve the deficiencies of PoW (energy expenditure), PoS (security failure) and dPoS (centralization) by combining the best of each in a single consensus mechanism.
In the Proof of Formulation (PoF), Formulators act as block generators on the FLETA platform. The observers allow real-time confirmation of the blocks that are generated and avoid double spending. The PoF algorithm differs from the PoW in that it does not require enormous computing power and also differs from the DPoS, where only elected delegates can participate in mining.
Due to the short block time of only 0.5 seconds, mining is processed with high speed, and the blocks are instantly confirmed through the Observer Nodes. Among the five observation nodes, three of them should validate the blocks immediately after generating them, allowing the blocks to spread quickly.
There are many other consensus algorithms and ecosystems based on them. Many of them have their own merits, but there are also drawbacks; so it would be important to check the details of consensus algorithms and find the one that you regard as the best.
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